What does retainage serve to ensure in construction projects?

Retainage is a percentage of the contract amount that is withheld by the owner until the project is completed to ensure that the contractor fulfills all obligations outlined in the contract. This practice serves as a financial incentive for contractors to complete their work satisfactorily and on time, as they may be hesitant to leave tasks unfinished if they know a portion of the payment is being withheld. The retention of funds is meant to protect the owner from any potential issues like defects or incomplete work that could arise before the project's final acceptance.

In construction projects, retainage acts as a safeguard, encouraging contractors to maintain quality throughout the project and to resolve any outstanding issues before final payment is released. It thus plays an essential role in ensuring that contractors are motivated to fulfill all their contractual obligations before receiving the total payment.